Tips to Qualify for Availing Loan Against Security (LAS)
Considering taking a loan against your securities instead of liquidating your investments? It’s a smart move that allows you to access funds without bidding farewell to your carefully built portfolio. By opting for a Loan Against Securities (LAS), you can maintain the potential for long-term gains and dividends while meeting immediate financial needs. So, before you consider breaking your investments, explore the benefits of loan against securities (LAS) and learn the tips to qualify for availing Loan Against Security.
What is Loan Against Securities?
In today’s investment landscape, ace investors are diversifying their portfolios by incorporating stocks and securities alongside traditional saving and investment avenues. This not only enhances their overall wealth but also opens up opportunities for securing rapid, short-term loans against these assets. The benefit of loan against securities is the ability to access the necessary funds swiftly and efficiently as per your specific requirements.
When you’ve pledged your shares, you still continue to enjoy ownership benefits such as rights, dividends, bonuses, etc. In turn, you gain access to an overdraft facility based on the value of the pledged securities. This provides flexibility in using LAS loan funds at your discretion. The loan against security interest rate is calculated only on the withdrawn amount for the loan duration, usually at a lower rate compared to a personal loan.
How Does Loan Against Securities Work?
Loans against stocks work like flexible overdrafts. Imagine you pledge shares for a Rs. 5 lakh loan. If you take out Rs. 10,000 and pay it back in 2 months, you only pay interest on the withdrawn amount. Loan terms vary, so approval depends on eligibility and required documents.
Tips that Qualify You for a Loan Against Securities (LAS)
Before you apply for a loan against these collaterals, it’s a good idea to check out the tips we’re about to share to make sure you meet the loan qualifications.
(a) State the Purpose of the Loan
Clearly state the reason for which you require a loan, this enables the lender to promptly assess your intention. This facility is intended for addressing unforeseen financial requirements.
(b) Maintain a Good Credit Score
A good credit score is essential for qualifying for any type of loan, including LAS. Lenders use your credit score to assess your risk as a borrower. A higher credit score indicates that you are a good credit risk and are more likely to repay your loan on time.
(c ) Choosing a Reputable Lender
There are a number of lenders that offer LAS. When you look for a high-value lender, it is important to choose the one that offers the best value in terms of price and security.
(d) Have a Stable Income
Lenders want to see that you have a stable income that is sufficient to make your loan payments. If you are self-employed, you may need to provide additional documentation to prove your income.
(e) Audit the Pledged Shares and Securities
Review the shares and securities pledged as collateral. Banks maintain a list of approved holdings; verify if your assets meet the eligibility criteria.
Eligibility for Availing LAS
The loan against shares eligibility depends on the preferred lender. Therefore, when you take out loan against stocks and securities as collateral, make sure to meet the specified criteria to expedite your loan approval process.
Credit Evaluation Procedures
Once you’ve submitted your application, the lender will conduct a comprehensive assessment of your application and documents to gauge your creditworthiness. This evaluation includes your profile and the financial stability of your collateral, with its current market performance playing a pivotal role.
Benefits of Availing Loan Against Securities
When considering financial options, a Loan Against Securities emerges as a strategic choice with several advantages:
- Uninterrupted Investment Growth: By opting for a Loan on Securities, you gain access to funds without the need to sell your investments. This ensures that your investment portfolio continues to grow, leveraging market opportunities.
- Cost Effective Financing: Loans against Securities typically come with lower interest rates compared to unsecured loans. This cost-effectiveness makes it a financially prudent choice for those seeking capital while minimizing borrowing expenses.
- Streamlined Process: Experience a hassle-free journey with a streamlined process. From quick approval to the swift disbursement of funds, the efficiency of this lending option provides a convenient and timely financial solution.
Availing a Loan Against Securities like the loan against mutual funds via smallcase, not only meets immediate financial needs but also preserves your investment strategy, offering a balanced approach to wealth management.
To Wrap It Up…
In conclusion, following these crucial tips can greatly enhance your chances of qualifying for a Loan Against Security (LAS). Collateralizing assets such as shares and securities significantly increases your approval prospects. These loans offer the added advantage of flexibility, allowing for multiple drawdowns and repayments throughout the loan tenure. This flexibility is a key factor driving lenders to readily approve loans against these trusted collateral types, resulting in a higher sanction rate for such loans.
FAQs
Stocks, mutual funds, ETFs and bonds can be used as collateral when taking a loan against equity shares.
The age group eligible for availing loan against securities (LAS) varies from lender to lender, but most lenders require borrowers to be between the ages of 18 and 65.
Securing the loan against valuable assets enables financial institutions to offer borrowers lower interest rates than those associated with other personal loans or credit card debt. This enhances the cost-effectiveness of LAS or overdraft against shares for borrowers.
RBI guidelines cap loans against physical securities at Rs. 10 lakh and demat securities at Rs. 20 lakh per individual.
One can repay their loan through small monthly installments, covering only the interest, automatically deducted from their bank account. Additionally, one has the option to pay a portion of the margin against shares or clear overdue installments on our customer portal.
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